Perspective on Offshoring and New Jersey

By Susan J. Bottino

INTRODUCTION

It’s not hard to understand why the practice of sending service jobs overseas has increasingly become the focus of newspaper and magazine articles, television reports, academic studies, politicians and even online organizing by angry tech workers. Offshoring-the word given to the practice-raises concerns that we might be witnessing the beginning of the largest out-migration of these jobs in the nation’s history.

A nation accustomed to the disappearance of manufacturing jobs is now confronting the reality of highly skilled and educated workers potentially being as vulnerable as their blue collar brethren to their jobs going overseas. People who thought their training and career choice would keep them safe are finding out otherwise.

According to a recent Gallup Poll, 61 percent of Americans are concerned that they, or a friend or relative, might lose a job because the employer is moving it to another country. Another survey by the Employment Law Alliance found that 30 percent of those who responded know someone who lost his or her job to offshoring. And even just the threat of jobs being offshored can have a chilling effect on workers. When jobs are seen to be at risk, workplace progress and morale suffer as workers are reluctant to push for time off, flexible hours, better pay, health benefits and other aspects critical to their rights and dignity.

To be clear, outsourcing refers to a company contracting with another vendor for functions that the company traditionally performed itself. Offshoring is when a company outsources contracts to vendors overseas or sends the work to its own satellite offices overseas. It has become especially prevalent in such areas as software programming, data entry, call centers and other service-oriented work.

So today, workers in India, the Philippines and elsewhere process tax returns for Ernst & Young, make reservations for Delta Air Lines customers and answer state government hotlines. Indeed, offshoring received national attention in 2002, when it was reported that calls to toll-free numbers set up to help New Jersey residents with their electronic welfare or food stamp cards were being answered by operators in Bombay.

Until a few years ago, it was impossible for such work to be done outside the U.S. Technology changed that. Satellites and high-speed undersea telecom cables as well as deregulation of telecommunications in the U.S., Europe and Asia mean firms can send scanned documents overseas for processing less expensively than before. And the convergence of a variety of software applications makes it possible for global operations to work in a common software environment. In addition, liberalization of markets in Asia and Eastern Europe mean that entrepreneurs in those areas can now respond quickly to outsourcing opportunities. Affordable videoconferencing makes face-to-face contact across the globe commonplace while the Internet, with its e-mail, instant messaging and other applications, facilitates communication between areas and helps management keep in touch. As Nandan Nilekani, chief executive of Infosys Technologies, said, “Everything you can send down a wire is up for grabs.”5 Major recipients of offshored jobs are India, China, Philippines, Ireland, Canada, Mexico, Pakistan and Russia.

This report will look at jobs that have gone overseas from New Jersey and jobs in the state that are particularly vulnerable to offshoring in the future, explain the implications that this potential job loss could have on the economy and suggest appropriate policy responses.